Tariff clouds and prospects of oversupply double pressure on oil prices, falling to new lows since May.

Amid escalating trade tensions between China and the United States and easing tensions in the Middle East, concerns about global oversupply of crude oil have intensified, leading to a pessimistic sentiment and causing oil prices to fall to their lowest level since May. On Friday, WTI crude oil futures fell by 5.32% to $58.24 per barrel, with a weekly decline of 4.34%; Brent crude oil futures fell by 4.75% to $62.12 per barrel, with a weekly decline of 3.73%. On Friday, US President Trump threatened to impose "massive tariffs" on Chinese goods. This statement reignited market concerns that a tariff war between the world's two largest economies would impact oil consumption. John Kilduff, founding partner of Again Capital LLC, said, "If Trump follows through on his latest threat, it will have a negative economic impact and hit demand for crude oil and refined products." According to data from Bridgeton Research Group, Commodity Trading Advisors (CTAs) that can accelerate price momentum significantly reduced their long positions on Friday, causing the short position ratio for WTI crude oil to rise to 91%, a significant increase from 55% on October 9. The institution further added that the short position ratio for Brent crude oil is also at a similar level. Rebecca Babin, Senior Energy Trader at CIBC Private Wealth Group, said, "Crude oil is facing a triple hit today - renewed trade tariff tensions weakening demand prospects, broader risk asset sell-offs keeping bottom-fishing buyers on hold, and systematic strategies potentially adding further short positions. Without a catalyst for bottom-fishing, we may see greater-than-expected declines before finding support." Additionally, oil prices are facing new pressure as Israel begins withdrawing from Gaza and the US issues a 72-hour ultimatum demanding Hamas release all remaining hostages - a significant step towards ending the turmoil in the Middle East region. The Middle East region is a source of approximately one-third of global oil, and this development essentially eliminates the oil risk premium previously attributed to conflicts in the region. Meanwhile, with crude oil production increasing both within and outside the OPEC+ alliance, the oil market is heading towards a significant oversupply. OPEC+ agreed last weekend to raise production quotas to regain market share. Citigroup pointed out that overall market sentiment remains bearish, but there are still differing opinions on the pessimism about oil price prospects. The decline in oil prices on Friday may also be influenced by the so-called "gamma effects," where there is a significant amount of option positions near $60. Put options at this price point are the largest short contracts held for the coming year, with open interest reaching 109,000 contracts. As futures prices fluctuate around $60, market makers' hedging behavior may intensify volatility, and further declines could compel them to increase selling pressure.